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A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
We study the following fundamental data-driven pricing problem. How can/should a decision-maker price its product based on data at a single historical price? How valuable is such data? We consider a decision-maker who optimizes over…
A novel high-frequency market-making approach in discrete time is proposed that admits closed-form solutions. By taking advantage of demand functions that are linear in the quoted bid and ask spreads with random coefficients, we model the…
Predicting query execution time is a fundamental issue underlying many database management tasks. Existing predictors rely on information such as cardinality estimates and system performance constants that are difficult to know exactly. As…
Executing even moderately large derivatives orders can be expensive and risky; it's hard to balance the uncertainty of working an order over time versus paying a liquidity premium for immediate execution. Here, we introduce the Time Is…
The present paper provides the basis for a novel financial asset pricing model that could avoid the shortcomings of, or even completely replace the traditional DCF model. The model is based on Brownian motion logic and expected future cash…
This paper addresses a novel data science problem, prescriptive price optimization, which derives the optimal price strategy to maximize future profit/revenue on the basis of massive predictive formulas produced by machine learning. The…
Since the 1960s, the question whether markets are efficient or not is controversially discussed. One reason for the difficulty to overcome the controversy is the lack of a universal, but also precise, quantitative definition of efficiency…
This paper introduces an information-based model for the pricing of storable commodities such as crude oil and natural gas. The model uses the concept of market information about future supply and demand as a basis for valuation. Physical…
We investigate the problem of pricing derivatives under a fractional stochastic volatility model. We obtain an approximate expression of the derivative price where the stochastic volatility can be composed of deterministic functions of time…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
Since exchange economy considerably varies in the market assets, asset prices have become an attractive research area for investigating and modeling ambiguous and uncertain information in today markets. This paper proposes a new generative…
Despite the fact that an intraday market price distribution is not normal, the random walk model of price behaviour is as important for the understanding of basic principles of the market as the pendulum model is a starting point of many…
This paper deals with a stochastic order-driven market model with waiting costs, for order books with heterogenous traders. Offer and demand of liquidity drives price formation and traders anticipate future evolutions of the order book. The…
This paper develops a model for option market making in which the hedging activity of the market maker generates price impact on the underlying asset. The option order flow is modeled by Cox processes, with intensities depending on the…
A point process for event arrivals in high frequency trading is presented. The intensity is the product of a Hawkes process and high dimensional functions of covariates derived from the order book. Conditions for stationarity of the process…
We consider a pair of traders in a market where the information available to the second trader is a strict subset of the information available to the first trader. The traders make prices based on the information available concerning a…
For a semi-martingale $X_t$, which forms a stochastic boundary, a rate-optimal estimator for its quadratic variation $\langle X, X \rangle_t$ is constructed based on observations in the vicinity of $X_t$. The problem is embedded in a…
We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…